If you can afford it, paying off your mortgage quickly can be such a relief. You can be free of the millstone of monthly mortgage repayments. We take you through four hacks to pay off your mortgage quickly and what you need to keep in mind.
Is it smart to pay off your house early?
Whether paying off your mortgage faster is an advantage or disadvantage will depend on your unique circumstances. It might be a good idea to seek guidance from a mortgage broker or independent financial adviser before making a decision.
It is not uncommon to find that some circumstances may place you at a disadvantage if you pay off your mortgage early. Speaking to a financial adviser could help you make the right choice.
How can I pay off my mortgage faster?
Paying off your mortgage quickly is usually a question of cutting down on your expenses and increasing your income. It makes sense to switch to the best deals for energy providers, phone and broadband providers, insurance and banking services.
If possible, and following guidance from a financial adviser, you could also put any extra cash you have into your mortgage. Here are three hacks to pay off your mortgage quickly.
1. Ask your mortgage lender to reduce the mortgage term
If your income is high enough and you don’t have any other debts, you could ask your mortgage lender to reduce your mortgage term. This increases your monthly mortgage repayments and helps you pay off the mortgage quickly and save on interest payments.
For example, if you have a £100,000 repayment mortgage at 5% interest over 25 years, your monthly payments would be £585. The total amount of interest would be £75,441.
If the mortgage term was reduced to 15 years, your monthly payments would increase to £791. However, the total amount of interest you would pay would be reduced to £42,377, saving you £33,064.
2. Overpay on your mortgage repayments
Before you decide to overpay your mortgage, talk to your mortgage lender. If you’re on a fixed interest rate, you might only be allowed to pay up to 10% of your mortgage balance each year without incurring an early repayment charge (ERC).
However, if you are on a variable or tracker rate of interest, you may be allowed to make unlimited overpayments without an ERC.
Switching from a fixed to a variable rate of interest could help you pay off your mortgage quickly and save on interest payments. You could also switch from one lender to another or from one mortgage deal to another.
Some mortgages can present you with opportunities to pay off your mortgage quickly. For example, a buy-to-let mortgage allows you to rent out your home. You could use the rent to pay off your mortgage quickly.
4. Rent out space
Are you on a regular mortgage and don’t want to remortgage? If so, you could ask your mortgage lender whether you can rent out a room without incurring charges or breaching your mortgage contract. Doing this could help you earn up to £7,500 per year tax free, thanks to the government’s Rent a Room Scheme. You could also rent out your garage or part of your driveway.